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[Please note that the following is intended only to provide general background information about long-term care options. While the information is believed to be reasonably accurate, you are cautioned and encouraged to discuss the purchase of any long-term care insurance policy or other type of long-term care program with a qualified, licensed financial advisor who is aware of your individual situation. CSU-ERFA is not responsible for the content of linked web pages, and cannot guarantee the accuracy of those pages.]
Decisions regarding the purchase of long-term care insurance can be difficult owing both to the high cost and to the complicated nature of many long-term care policies. In addition, a recent New York Times article  has documented the difficulties that some holders of long-term care policies have had obtaining benefits from their insurers.
The need for long-term care insurance depends greatly on individual circumstances. For that reason, CSU-ERFA can't make specific individual recommendations regarding LTC insurance, but we can provide some general information.
There are several risk factors that need to be taken into account when considering the purchase of LTC insurance. Life expectancy is a major consideration. The longer that you live, the greater the likelihood that you will need long-term care. Unfortunately, the premiums for LTC insurance also depend on your age when you purchase the insurance. Gender is a major factor in the need for long-term care. Women, in general, live longer than men and thus are more likely to need long-term care. Marital status also is an important factor. A married person with adult children is less likely to need formal long-term care than a single person.
A 1991 article in the
New England Journal of Medicine by P. Kemper and C. Murtaugh
determined the lifetime chance that a person who currently is
65 years old would need nursing home care:
More recent actuarial experience suggests that there is about a 50% chance that a person who is 65 years old will need nursing home care at some time during the remainder of his or her life. What has remained fairly steady is the percentage of people needing long-term care for more than five years. Less than about 10% of those who received benefits from the CalPERS long-term care program needed long-term care for more than five years, and only about 3% need long-term care for more than 10 years.
The costs of long-term care are high. Currently (2013), nursing home care in California averages about $330 per day, but varies widely in different parts of the state. Some people would prefer to remain in their own residence rather than to move into a nursing home. The CalPERS long-term care program and some private LTC insurance policies provide options for in-home care as well as nursing home care. However, the benefits offered for in-home care may differ from those offered for care in a licensed facility. You should read and understand fully the provisions of any LTC policy that you are considering. In particular, most LTC policies have a "deductible period" during which you must cover the expenses of long-term care from your own resources. The most common deductable period is 90 days. The reason for this is that about 30% of patients who enter a nursing home will either recover sufficiently within 90 days to no longer need LTC, or will die within the 90 day period.
The CalPERS Long-Term Care Program:
CSU-ERFA was instrumental in working with the Public Employees Retirement System (CalPERS) to establish the CalPERS Long-Term Care Insurance Program. Several features of the program including its flexibility, consumer protection standards, and the California Partnership option were influenced by our work. The Association actively advocates reforms to improve the program, and we provide individual assistance to CSU-ERFA members who encounter problems with the program. (Note, however, that CSU-ERFA does not formally recommend any LTC program or policy. LTC insurance is one of several options that an individual should consider depending on his or her situation.) Currently, the CalPERS LTC program is closed to new members; however, it is scheduled to begin issuing policies again in December of 2013. (Update: The CalPERS LTC program was reopened to new members on Dec. 24, 2013.) Costs for long-term care services have been rising rapidly, and the CalPERS LTC has had to raise rates for current policy holders a number of times. Modest rate increases are scheduled for 2013 and 2014, and a major rate increase will affect certain policies in 2015. However, policy holders affected by the rate increases will be given the option of converting their policies to ones with more limited benefits to avoid the increase.
All California public employees and annuitants, their spouses, their parents and parents-in-law, and siblings over the age of 18 are eligible to apply for LTC coverage from the CalPERS Long-Term Care Program. Enrollment in the program is subject to underwriting standards and is not guaranteed. The applicant's medical history may affect acceptance. In contrast to private LTC insurance, the CalPERS program is a not-for-profit operation. Except for administrative costs, all the money collected from premiums is placed in a fund that is used to underwrite benefits. It should be noted that this is a separate fund from the CalPERS pension fund. Premiums may be raised from time-to-time in order to keep the LTC fund solvent.
The CalPERS LTC Program offers a wide variety of coverage choices both in regard to type of coverage and magnitude of daily and total benefits including an option for unlimited duration coverage. The three types of coverage offered in the CalPERS LTC Program include a facilities only plan, a comprehensive plan, and a "partnership" plan. The "partnership" plan coordinates CalPERS LTC benefits with Medi-Cal long-term care benefits while providing a level of asset protection that is considerably greater than normally available when one applies for LTC benefits from Medi-Cal.
The "facilities plan" provides benefits only in nursing homes, assisted living facilities, and residential care facilities. The "comprehensive" and "partnership" plans also provide benefits in home and community care settings. To be eligible for benefits under the CalPERS LTC Program an individual must need assistance with two "activities of daily living" or must have a severe cognitive impairment. The "activities of daily living" are related to bathing, dressing, eating, transferring, toileting, and continence. Note that private LTC policies may have different eligibility requirements for benefits.
Satisfaction surveys conducted by CalPERS of LTC Program claimants generally have elicited favorable responses. The following information was provided by a CalPERS LTC Program administrator  based on surveys taken since the inception of the program.
Claims Experience for CalPERS LTC Program and Private LTC Insurers:
Because a person must meet specific criteria to be eligible for benefits under a LTC policy, denial of benefits is relatively common in the LTC insurance industry. In California approximately 25% of claims for LTC benefits are denied according to data collected by the Department of Insurance. The CalPERS LTC Program denial of benefits rate is significantly lower . From the inception of the CalPERS LTC Program through December 31, 2006 a total of 13,016 requests for benefits were received by the program. Of these, 1,165 (8.9%)were denied on the basis that eligibility requirements were not met at the time of the claim. Another 1,880 claims (14.4%) were closed before a claim decision was made. These claims were closed for one of three reasons; recovery of function, death of the claimant, or a decision by the claimant to close the claim. Individuals whose claims are initially turned down by the CalPERS LTC Program are advised not to hesitate to request benefits at a later date if their medical, functional, or cognitive status declines further. Of the 1,165 claimants who were turned down initially, 526 were granted benefits at a later date.
While the data for private LTC insurers is sketchy, the New York Times article cited in the introduction  compared the rate of formal complaints filed with state insurance commissioners by the major companies writing LTC insurance. Of these three companies stood out as having significantly higher than average numbers of complaints relative to the number of policies in force. Conseco Senior Health and its wholly-owned subsidiary Bankers Life and Casualty along with Penn Treaty American all had complaint rates significantly above the average.
Alternative and Supplemental Options for LTC:
Some Tips for Those Considering the Purchase of LTC Insurance:
The CalPERS Long-Term Care Program.
Charles Duhigg, "Aged, Frail, and Denied Care by Their
Insurers", New York Times, March 26, 2007.
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